‭- 2 -‬

‭1.‬‭Read the extracts and answer the questions that‬‭follow.‬

‭Text A - Zoom continues to grow and grow‬

‭ oom’s CEO and founder Eric Yuan sees continued growth for both his own video communication product‬
Z
‭and for the video communication market in general. Resources have flowed into the video communications‬
‭as well as other information technology (IT) markets over the last 12 months. The Covid19 pandemic has‬
‭forced huge numbers of businesses and organizations into online working and Zoom along with Microsoft‬
‭Teams and Skype have been significant beneficiaries. Yuan said Zoom's sales increased from $2.5 billion‬
‭in 2019 to $3.5 billion in 2020.‬

‭ ne of the most significant consequences of the growth in online working is the decline in the‬‭demand‬‭for‬
O
‭office space in major cities around the world.‬

‭ he growth in homeworking using software apps such as Zoom has also led to training amongst workers in‬
T
‭the labour market. People have had to learn how to use new software and enhance their skills in existing‬
‭software. One IT worker said, ‘industries from financial services to law will see efficiency gains from the‬
‭technological advance caused by the pandemic.’ In the public sector, technological improvements have‬
‭helped the healthcare sector in areas such as organising the vaccination programme to combat the‬
‭pandemic.‬

‭Table 1: US domestic airline passenger numbers‬

‭Year‬ ‭ umber of domestic‬

N
‭passengers (millions)‬

‭2018‬ ‭849‬

‭2019‬ ‭926‬

‭2020‬ ‭369‬

‭2021‬ ‭674‬

‭2022‬ ‭688‬

‭Text B - Problems for the airline industry‬

‭ able 1 shows the impact of the Covid19 pandemic on the airline industry in the US. Domestic and global‬
T
‭air travel has been one of the hardest-hit industries since the pandemic began in early 2020. This decline in‬
‭air travel has come at a significant cost to airline industry revenues, profits, and employment.‬

‭ fter enduring lockdowns that made international travel nearly impossible, many consumers have a‬
A
‭newfound desire to travel, leading to a trend that is seeing countless people traveling for longer and more‬
‭frequently. Revenge travel gained popularity on social media in 2021 and flourished in 2022 as people‬
‭flocked to worldwide destinations after being unable to do so for the previous two years.‬
 ‭- 3 -‬

‭(Question 1 continued)‬

‭Text C - Cineworld closures‬

‭ ineworld is set to close a large number of its cinemas in the US and the UK in the coming months. The‬
C
‭pandemic has hit the cinema industry particularly hard. Lock-downs, social-distancing, and a pause in the‬
‭release of major films have made business conditions extremely challenging for the cinema industry and‬
‭led to a fall in the producer surplus of firms in the market.‬

‭ hile Cineworld has struggled, online media entertainment providers such as Netflix, Disney+, and‬
W
‭Amazon Prime have seen a significant increase in revenues and profits. An industry insider said, ‘People‬
‭who are forced to stay at home have lots of choices when they pick up their remote control’. The sales of‬
‭complementary goods‬‭such as TVs and sound systems‬‭have benefited from the growth of online media.‬
‭In the market for 45-inch QLED TV’s, when the price increased from $350 to $400, the quantity supplied‬
‭increased from 8 million to 9 million.‬

‭Adapted from sources:‬‭https://www.euronews.com/2023/04/21/post-covid-revenge-travel-has-gone-big-and-the-revenge-is-sweet‬

‭(a)‬ ‭(i) Define the term‬‭demand‬‭indicated in bold (Text‬‭A, paragraph 2).‬ ‭[2]‬

‭(ii) Define the term‬‭complementary goods‬‭indicated‬‭in bold (Text C, paragraph 2).‬ ‭[2]‬

‭(b)‬ ‭(i) Using information from Table 1, calculate the percentage change in domestic‬
‭passengers from 2019 to 2020.‬ ‭[2]‬

‭(ii) Using information from Text C paragraph 2, calculate the price elasticity of supply‬
‭of 45-inch QLED TV’s.‬ ‭[3]‬

‭(c) Using a demand and supply diagram, explain how the efficiency gains amongst financial‬
‭services firms might affect the market price in the financial services market‬
‭(Text A paragraph 3).‬ ‭[4]‬

‭(d) Using an appropriate diagram and reference to a non-price determinant of demand,‬

‭explain the changes in the market for renting office space (Text A paragraph 2).‬ ‭[4]‬

‭(e) Using an appropriate diagram, explain the impact the fall in demand for cinemas during‬
‭the pandemic has had on the producer surplus of firms in the cinema market such as‬
‭Cineworld (Text C paragraph 1).‬ ‭[4]‬

‭(f) Explain two determinants of price elasticity of demand.‬ ‭[4]‬

‭(g) No part g evaluation for today’s test.‬

 ‭- 2 -‬

‭1.‬‭Read the extracts and answer the questions that‬‭follow.‬

‭Text A - Zoom continues to grow and grow‬

‭ oom’s CEO and founder Eric Yuan sees continued growth for both his own video communication product‬
Z
‭and for the video communication market in general. Resources have flowed into the video communications‬
‭as well as other information technology (IT) markets over the last 12 months. The Covid19 pandemic has‬
‭forced huge numbers of businesses and organizations into online working and Zoom along with Microsoft‬
‭Teams and Skype have been significant beneficiaries. Yuan said Zoom's sales increased from $2.5 billion‬
‭in 2019 to $3.5 billion in 2020.‬

‭ ne of the most significant consequences of the growth in online working is the decline in the demand for‬
O
‭office space in major cities around the world.‬

‭ he growth in homeworking using software apps such as Zoom has also led to training amongst workers in‬
T
‭the‬‭labour‬‭market. People have had to learn how to‬‭use new software and enhance their skills in existing‬
‭software. One IT worker said, ‘industries from financial services to law will see efficiency gains from the‬
‭technological advance caused by the pandemic.’ In the public sector, technological improvements have‬
‭helped the healthcare sector in areas such as organising the vaccination programme to combat the‬
‭pandemic.‬

‭Table 1: US domestic airline passenger numbers‬

‭Year‬ ‭ umber of domestic‬

N
‭passengers (millions)‬

‭2018‬ ‭849‬

‭2019‬ ‭926‬

‭2020‬ ‭369‬

‭2021‬ ‭674‬

‭2022‬ ‭688‬

‭Text B - Problems for the airline industry‬

‭ able 1 shows the impact of the Covid19 pandemic on the airline industry in the US. Domestic and global‬
T
‭air travel has been one of the hardest-hit industries since the pandemic began in early 2020. This decline in‬
‭air travel has come at a significant cost to airline industry revenues, profits, and employment.‬

‭ fter enduring lockdowns that made international travel nearly impossible, many consumers have a‬
A
‭newfound desire to travel, leading to a trend that is seeing countless people traveling for longer and more‬
‭frequently. Revenge travel gained popularity on social media in 2021 and flourished in 2022 as people‬
‭flocked to worldwide destinations after being unable to do so for the previous two years.‬
 ‭- 3 -‬

‭(Question 1 continued)‬

‭Text C - Cineworld closures‬

‭ ineworld is set to close a large number of its cinemas in the US and the UK in the coming months. The‬
C
‭pandemic has hit the cinema industry particularly hard. Lock-downs, social-distancing, and a pause in the‬
‭release of major films have made business conditions extremely challenging for the cinema industry and‬
‭led to a fall in the producer surplus of firms in the market.‬

‭ hile Cineworld has struggled, online media entertainment providers such as Netflix, Disney+, and‬
W
‭Amazon Prime have seen a significant increase in revenues and profits. An industry insider said, ‘People‬
‭who are forced to stay at home have lots of choices when they pick up their remote control’. The sales of‬
‭complementary goods‬‭such as TVs and sound systems‬‭have benefited from the growth of online media.‬
‭In the market for 45-inch QLED TV’s, when the price increased from $400 to $450, the quantity supplied‬
‭increased from 10 million to 11 million.‬

‭Adapted from sources:‬‭https://www.euronews.com/2023/04/21/post-covid-revenge-travel-has-gone-big-and-the-revenge-is-sweet‬

‭(a)‬ ‭(i) Define the term‬‭labour‬‭indicated in bold (Text‬‭A, paragraph 3).‬ ‭[2]‬

‭(ii) Define the term‬‭complementary goods‬‭indicated‬‭in bold (Text C, paragraph 2).‬ ‭[2]‬

‭(b)‬ ‭(i) Using information from Table 1, calculate the percentage change in domestic‬
‭passengers from 2018 to 2019.‬ ‭[2]‬

‭(ii) Using information from Text C paragraph 2, calculate the price elasticity of supply‬
‭of 45-inch QLED TV’s.‬ ‭[3]‬

‭(c) Using a demand and supply diagram, explain how the efficiency gains amongst financial‬
‭services firms might affect the market price in the financial services market‬
‭(Text A paragraph 3).‬ ‭[4]‬

‭(d) Using an appropriate diagram and reference to a non-price determinant of demand,‬

‭explain the changes in the market for renting office space (Text A paragraph 2).‬ ‭[4]‬

‭(e) Using an appropriate diagram, explain the impact the fall in demand for cinemas during‬
‭the pandemic has had on the producer surplus of firms in the cinema market such as‬
‭Cineworld (Text C paragraph 1).‬ ‭[4]‬

‭(f) Explain two non-price determinants of supply.‬ ‭[4]‬

‭(g) No part g evaluation for today’s test.‬

 ‭- 2 -‬

‭1.‬‭Read the extracts and answer the questions that‬‭follow.‬

‭Text A - Zoom continues to grow and grow‬

‭ oom’s CEO and founder Eric Yuan sees continued growth for both his own video communication product‬
Z
‭and for the video communication market in general. Resources have flowed into the video communications‬
‭as well as other information technology (IT) markets over the last 12 months. The Covid19 pandemic has‬
‭forced huge numbers of businesses and organizations into online working and Zoom along with Microsoft‬
‭Teams and Skype have been significant beneficiaries. Yuan said Zoom's sales increased from $2.5 billion‬
‭in 2019 to $3.5 billion in 2020.‬

‭ ne of the most significant consequences of the growth in online working is the decline in the demand for‬
O
‭office space in major cities around the world.‬

‭ he growth in homeworking using software apps such as Zoom has also led to training amongst workers in‬
T
‭the labour market. People have had to learn how to use new software and enhance their skills in existing‬
‭software. One IT worker said, ‘industries from financial services to law will see efficiency gains from the‬
‭technological advance caused by the pandemic.’ In the public sector, technological improvements have‬
‭helped the healthcare sector in areas such as organising the vaccination programme to combat the‬
‭pandemic.‬

‭Table 1: US domestic airline passenger numbers‬

‭Year‬ ‭ umber of domestic‬

N
‭passengers (millions)‬

‭2018‬ ‭849‬

‭2019‬ ‭926‬

‭2020‬ ‭369‬

‭2021‬ ‭674‬

‭2022‬ ‭688‬

‭Text B - Problems for the airline industry‬

‭ able 1 shows the impact of the Covid19 pandemic on the airline industry in the US. Domestic and global‬
T
‭air travel has been one of the hardest-hit industries since the pandemic began in early 2020. This decline in‬
‭air travel has come at a significant cost to airline industry revenues, profits, and employment.‬

‭ fter enduring lockdowns that made international travel nearly impossible, many consumers have a‬
A
‭newfound desire to travel, leading to a trend that is seeing countless people traveling for longer and more‬
‭frequently. Revenge travel gained popularity on social media in 2021 and flourished in 2022 as people‬
‭flocked to worldwide destinations after being unable to do so for the previous two years.‬
 ‭- 3 -‬

‭(Question 1 continued)‬

‭Text C - Cineworld closures‬

‭ ineworld is set to close a large number of its cinemas in the US and the UK in the coming months. The‬
C
‭pandemic has hit the cinema industry particularly hard. Lock-downs, social-distancing, and a pause in the‬
‭release of major films have made business conditions extremely challenging for the cinema industry and‬
‭led to a fall in the‬‭producer surplus‬‭of firms in‬‭the market.‬

‭ hile Cineworld has struggled, online media entertainment providers such as Netflix, Disney+, and‬
W
‭Amazon Prime have seen a significant increase in revenues and profits. An industry insider said, ‘People‬
‭who are forced to stay at home have lots of choices when they pick up their remote control’. The sales of‬
‭complementary goods‬‭such as TVs and sound systems‬‭have benefited from the growth of online media.‬
‭The US government provided stimulus check payments to people to increase their income. The average‬
‭American has an income of $31,000 and it increased to $33,400. In that same time period the sales of TV’s‬
‭increased from 8 million to 9 million.‬

‭Adapted from sources:‬‭https://www.euronews.com/2023/04/21/post-covid-revenge-travel-has-gone-big-and-the-revenge-is-sweet‬

‭(a)‬ ‭(i) Define the term‬‭producer surplus‬‭indicated in‬‭bold (Text C, paragraph 1).‬ ‭[2]‬

‭(ii) Define the term‬‭complementary goods‬‭indicated‬‭in bold (Text C, paragraph 2).‬ ‭[2]‬

‭(b)‬ ‭(i) Using information from Table 1, calculate the percentage change in domestic‬
‭passengers from 2020 to 2021.‬ ‭[2]‬

‭(ii) Using information from Text C paragraph 2, calculate the income elasticity of demand‬
‭of TV’s.‬ ‭[3]‬

‭(c) Using a demand and supply diagram, explain how the efficiency gains amongst financial‬
‭services firms might affect the equilibrium quantity in the financial services market‬
‭(Text A paragraph 3).‬ ‭[4]‬

‭(d) Using an appropriate diagram and reference to a non-price determinant of demand,‬

‭explain the changes in the market for air travel (Text B paragraph 2).‬ ‭[4]‬

‭(e) Using an appropriate diagram, explain the impact the increase in quantity demanded of‬
‭online media and increased consumer incomes have on the market for TV’s‬
‭(Text C paragraph 2).‬ ‭[4]‬

‭(f) Explain two disadvantages of a free market economy.‬ ‭[4]‬

‭(g) No part g evaluation for today’s test.‬

‭Markscheme (make-up version follows) [some questions have v2 and v3]‬

‭ i.‬‭Demand‬‭is the quantity of a good or service that‬‭consumers are willing and able to purchase at various‬
a
‭prices during a specific time period.‬

‭ i. v2‬‭Labour‬‭is the human factor needed for production.‬‭It includes the physical and mental effort that‬
a
‭people contribute to the production of goods and services.‬

‭ i. v3‬‭Producer surplus‬‭is the difference between‬‭the price producers are willing and able to sell it and the‬
a
‭price earned from selling the good at the market price.‬

‭aii.‬‭Complementary goods‬‭are goods that are consumed‬‭together.‬

‭369‬‭−
‬ ‭‬‭926‬
‭bi. %‬‭/\‬‭= (new - old) / old X 100‬ ‭2019 to 2020‬ ‭926‬
× ‭100‬ = ‭- 60.15 %‬

‭926‬‭−
‬ ‭‬‭849‬
‭2018 to 2019 v2‬ ‭849‬
× ‭100‬ = ‭9.07 %‬

‭674‬‭−
‬ ‭‬‭369‬
‭2020 to 2021 v3‬ ‭369‬
× ‭100‬ = ‭82.66 %‬

‭9‬−‭8‬ ‭400‬−‭350‬
‭bii. PES = %‬‭/\‬‭Qs / %‬‭/\‬‭P‬ ‭8‬
× ‭100‬ = ‭12‬. ‭5‬ ‭350‬
× ‭100‬ = ‭14‬. ‭29‬ ‭12.5 / 14.29 =‬‭0.87‬

‭11‬−‭10‬ ‭450‬−‭400‬
‭v2‬ ‭10‬
× ‭100‬ = ‭10‬ ‭400‬
× ‭100‬ = ‭12‬. ‭5‬ ‭10‬‭/ 12.5 =‬‭0.80‬

‭9‬−‭8‬ ‭33‬,‭400‬−‭31‬,‭000‬
‭v3 YED = %‬‭/\‬‭Qd / %‬‭/\‬‭Y‬ ‭8‬
× ‭100‬ = ‭12‬. ‭5‬ ‭31‬,‭000‬
× ‭100‬ = ‭7.‬ ‭74‬ ‭12.5 / 7.74 =‬‭1.61‬

‭ . Using a demand and supply diagram, explain how the efficiency gains amongst financial services firms‬
c
‭might affect the market price in the financial services market.‬

‭ echnological advances and more efficient workers‬

T
‭are non-price determinants of supply. This will‬
‭decrease costs for financial services firms and they‬
‭will be able to supply more at every price. As seen‬
‭in the figure on the left this is shown by a‬‭shift‬‭to‬
‭the right‬‭of Supply curve from‬‭S1 to S2‬‭. The‬
‭equilibrium price will‬‭decrease‬‭from‬‭P1 to P2‬‭.‬

‭ 2 asks for the change in equilibrium quantity, so‬

v
‭the last sentence should be:‬

‭ he equilibrium quantity will‬‭increase‬‭from‬‭Q1 to‬

T
‭Q2‬‭.‬
‭ . Using an appropriate diagram and reference to a non-price determinant of demand, explain the changes‬
d
‭in the market for renting office space.‬

‭ eople would rather work at home instead of‬

P
‭working in an office. Consumer tastes and‬
‭preferences are a non-price determinant of‬
‭demand. The demand for rented office space will‬
‭shift to the left‬‭from‬‭D1 to D3‬‭as seen in the‬
‭figure on the left. This will cause a‬‭decrease‬‭in‬‭the‬
‭equilibrium quantity from‬‭Q1 to Q3‬‭, and a‬
‭decrease‬‭in the equilibrium price from‬‭P1‬‭to‬‭P3‬‭.‬

‭ . v3 Using an appropriate diagram and reference to a non-price determinant of demand, explain the‬
d
‭changes in the market for air travel.‬
‭ he text said that “consumers have a newfound‬
T
‭desire to travel.” Consumer tastes and preferences‬
‭are a non-price determinant of demand. Since‬
‭people are “traveling for longer and more‬
‭frequently” the‬‭demand curve will shift to the‬
‭right‬‭from‬‭D1 to D2‬‭since consumers demand‬
‭more air travel at every price. Prices will‬‭increase‬
‭from‬‭P1 to P2‬‭and the equilibrium quantity will‬
‭increase‬‭from‬‭Q1 to Q2‬‭as seen in the figure on‬
‭the left.‬

‭ . Using an appropriate diagram, explain the impact the fall in demand for cinemas during the pandemic‬
e
‭has had on the producer surplus of firms in the cinema market such as Cineworld.‬
‭ fall in demand is shown in the diagram with a‬
A
‭shift to the left of demand from‬‭D1‬‭to‬‭D2‬‭. The‬
‭original producer surplus was the area of triangle‬
‭P1AC‬‭and the new producer surplus is the area of‬
‭triangle‬‭P2BC‬‭. As shown in the diagram the‬
‭producer surplus has decreased‬‭.‬

(‭ accept any labeling that clearly shows the‬

‭decreased producer surplus)‬
‭ . v3 Using an appropriate diagram, explain the impact the increase in quantity demanded of online media‬
e
‭and increased consumer incomes have on the market for TV’s.‬
‭ onsumer income is a non-price determinant of‬
C
‭demand. Also, online media and TV’s are‬
‭complements, so if people are buying more online‬
‭media they will buy more TV’s. The‬‭demand curve‬
‭will shift to the right‬‭from‬‭D1 to D2‬‭since‬
‭consumers demand TV’s at every price. Prices will‬
‭increase‬‭from‬‭P1 to P2‬‭and the equilibrium‬
‭quantity will‬‭increase‬‭from‬‭Q1 to Q2‬‭as seen in the‬
‭figure on the left.‬

‭(full marks for mentioning income‬‭or‬‭complements)‬

‭f. Explain two determinants of price elasticity of demand.‬

‭ ccept any‬‭two‬‭of the following: Number and closeness‬‭of substitutes, type of good (necessity vs luxury),‬
A
‭proportion of income spent on the good, time period, how widely it is defined. Also allow addictiveness if the‬
‭other determinant is not necessity.‬

‭f. v2 Explain two non-price determinants of supply.‬

‭ ccept any‬‭two‬‭of the following: Changes to the costs‬‭of production, Changes to indirect taxes and‬
A
‭subsidies, Changes to technology, Changes to the number of firms, Weather events or other shocks, Future‬
‭price expectations, Goods in joint and competitive supply.‬

‭f. v3 Explain‬‭two‬‭disadvantages of a free market economy.‬

‭Accept any two of the following:‬

‭‬ F
● ‭ ree market activity can lead to a rise in the scale of income and wealth inequality.‬
‭●‬ ‭Businesses can develop monopoly power which leads to higher prices and damage to consumer‬
‭welfare.‬
‭●‬ ‭Under or non-provision of public goods.‬
‭●‬ ‭Under-provision of merit goods such as health and education – which many cannot afford – leading‬
‭to lower social welfare.‬
‭●‬ ‭Free markets may fail to address negative externalities from production and consumption –‬
‭unsustainable growth.‬
‭●‬ ‭Deregulated financial markets often prone to bouts of instability – the fall out from which affects‬
‭millions not directly involved.‬